Securities Commission Malaysia introduces new Sukuk framework

The launch of the SRI Sukuk framework is in line with the initiative set out under the SC’s Capital Market Masterplan two to promote socially responsible financing and investment. With the shifts in investor demographics, there are growing concerns over environmental and social impact of business and greater demand for stronger governance and ethics from businesses. The Malaysian capital market is well-positioned to capitalise on these changing trends and facilitate sustainable and responsible investing.

“The introduction of the SRI Sukuk framework is part of the SC’s developmental agenda to facilitate the creation of an eco-system conducive for SRI investors and issuers and is also in line with the rising trend of green bonds and social impact bonds that have been introduced globally to facilitate and promote sustainable and responsible investing. Combined with Malaysia’s leading position in the global Sukuk market, this framework will further enhance the country's value proposition as a centre for Islamic finance and sustainable investments”, said Datuk Ranjit Ajit Singh, Chairman of the SC.

The SRI Sukuk framework is an extension of the existing Sukuk framework and therefore, all the other requirements in the Guidelines on Sukuk continue to apply. The additional areas addressed in the framework for the issuance of SRI Sukuk include utilisation of proceeds, eligible SRI projects, disclosure requirement, appointment of independent party and reporting requirement.

Book Review - The History & Future of Islamic Finance

Yet today Islamic finance is a trillion-dollar industry with many financial institutions, corporations and governments keen to embrace it as a profit-making alternative to mainstream financial dealings.

Harris Irfan is an insider on two fronts. He is a Muslim and also an expert in finance and commerce. He has worked as an investment banker in Europe and the Middle East and been head of Islamic finance at Barclays; he also founded Cordoba Capital, an Islamic finance advisory firm.

Mr Irfan is a man with a mission: to show that Islamic finance might be able to make a real contribution to our economic woes. He asks the reader to consider whether the Islamic world can "bring something of benefit to the Western world, and vice versa".

This is no mean task, but Mr Irfan uses his own professional and personal experiences to weave together an accessible and interesting story.

We get an insight into the birth of the Islamic finance system in the fifties, to the establishment of the first Muslim banks in Saudi Arabia and the Gulf States and the gradual recognition by Western banks of the enormous profit potential in structuring products on a sharia-compliant basis.

Traditional clerics were flattered with the attention and remuneration offered by the giants of the banking industry in exchange for their expertise.

While this book isn't full of jargon, it helps to know something about how the investment industry works. You also need to have some sense of Islamic history and religious concepts. But the religious commentary does not overcomplicate the narrative. Anecdotes about the life of the eighth-century Muslim legal scholar Abu Hanifa, the financial workings of the Ottoman Empire and the modern controversial Pakistani scholar Taqi Usmani all add weight.

The last chapter ponders the future of Islamic banking after some sharia-compliant finances were unfairly equated with funding terrorism, Worth reading.

Indo Business

Govt taking steps to Promote Islamic Banking: Expert

The government is taking meaningful steps to promote Islamic finance which will soon transform Pakistan as a world leader in this sector, an industry expert said on Sunday.

Currently, Pakistan ranks ninth globally in terms of development of the Islamic financial services industry but some recent purposeful steps would prove to be a game changer, said Mian Shahid, Chairman United International Group (UIG).

Now, the conventional insurance companies in Pakistan are set to make major inroads into the Islamic insurance business with the active support of regulators, he added.

Mian Shahid said the size of the global Islamic financial industry has been estimated to touch mark of $1.8 trillion soon while Pakistan will become an important player in it due to the largest Islamic market in the world outside Indonesia.

Takaful in most markets is still in its infancy and its potential to supersede conventional insurance in Muslim world is still largely unexploited, he said, adding its premiums that exceeded $4 billion in 2007 is expected to reach $20 billion by 2017.

Saudi Arabia, UAE and Malaysia enjoy the lion’s share on account of their advanced Islamic finance sector while Pakistan would need more simplified regulatory frameworks to propel the industry’s expansion, the insurance veteran observed.

He said that United Insurance Company (UIC) had become first company to operate Takaful (Islamic Insurance) in Pakistan which had pushed us to look aggressively beyond the borders. Financial performance and proper handling of key strategic issues remained challenging for Takaful operators, he noted.

Islamic Banking Sector in South Africa shows healthy growth

ABOUT half of Africa’s population is Muslim and businesses are gearing up to meet the needs of this growing market with Islamic finance and banking products.

Just less than a decade since the market was created, the local Islamic banking sector is estimated to be worth R80.6-billion in terms of assets under management.

On the African continent, the market’s assets are estimated to be more than $1.6-trillion (about R17-trillion) and are expected to surge to more than $5-trillion by 2020. These numbers may seem a stretch, but Africa is home to more than 500 million Muslims — about a quarter of the world’s Muslim population.

The growth of Islamic banking has not gone unnoticed by the National Treasury. Earlier this year during the budget speech, former finance minister Pravin Gordhan revealed that South Africa will launch Islamic bonds — better known as sukuk — before the end of the year. Sukuk are normally based on property or infrastructure and are designed to pay a fixed profit rate rather than a coupon.

Absa, FNB, Al Baraka Bank and HBZ Bank offer Islamic commercial and corporate banking products in South Africa.

Standard Bank has Islamic banking offerings in other countries on the continent, and Nedbank is rumoured to be assessing the possibility of dipping its toes into the market.

Islamic banks do not require their clients to be Muslims. “We are not pushing a religion here. We are pushing a [financial] product that has certain requirements,” said the head of Islamic banking at Absa, Uwaiz Jassat.

Those requirements have to be compliant with sharia law, which prohibits the taking and receiving of interest and also rules out certain other practices in conventional banking.

For example, when Islamic banking clients deposit money in their savings accounts, the lender will then trade the money to earn a return on it and those returns are shared with the customers.

Jassat said this method sometimes beat the return on a conventional interest-bearing savings account.

Last year, the returns for Absa Islamic banking saving accounts were 2% higher than for conventional ones.

So it is not surprising that more people are opting to switch to Islamic banking. About 10% of Absa’s Islamic bank customers are non-Muslim. Although Absa’s Islamic banking division is relatively small, its contributions are quite significant to the parent company’s bottom line, according to Jassat.

Al Baraka, the first stand-alone Islamic bank to operate in South Africa with a full bouquet of financial products, has more than 40 000 customers.

Al Baraka, whose parent company is based in Bahrain, has eight branches nationwide, most of them in Muslim communities. Last year, total assets grew 18.7% to nearly R4.4-billion, and advances swelled 13.1%. Al Baraka’s deposit book grew 18.6% to R619.1-million and the equity finance book increased 23.1% to R126.6-million.

Al Baraka’s CEO, Shabir Chohan, said about 30% of the Muslim population — which is estimated to be more than two million strong in South Africa — was using Islamic banking products provided by local banks.

The total Islamic banking sector in South Africa is estimated to be worth as much as R12-billion. Chohan said this meant his bank had the potential to grow eight to 10 times its current size.

Absa’s Islamic banking division is eager to introduce vehicle and home-loan products. Jassat said that once more products were introduced, “customer numbers will skyrocket”.

However, if it does not move fast, it might end up eating its rivals’ dust. FNB’s Islamic banking unit already offers these products and recently launched a term-deposit product.

The CEO of FNB’s Islamic banking unit, Amman Muhammad, attributed the success of FNB’s Islamic banking products to the fact that they were underpinned by strong values and principles that, he said, covered much more than just finance.

Much like Absa, which is controlled by Barclays, FNB has its sights set on expansion beyond South Africa’s borders.

“Africa provides a large opportunity for growth,” said Muhammad. “Muslim entrepreneurs play an important role in the African economy, so the need to provide appropriate financial services through the correct channel is paramount.”

Seeking sukuk success

The FINANCIAL -- The market for Islamic bonds, known as sukuk, is growing. Last year, the British Prime Minister David Cameron said that he wanted the UK to be the first sovereign government outside the Islamic world to use sukuk, suggesting he believes it will be an increasingly important part of global finance.

It shows London’s efforts to compete in the Islamic finance business, which is led by the Arab Gulf states and Malaysia.

The rise of sukuk is driven by customers who want investment and savings products compliant with Islamic law and principles (shariah). Demand is strong in the Gulf Cooperation Council (GCC) member states and in economies such as Malaysia and Turkey. For those seeking finance, offering shariah-compliant debt gives access to the large pool of capital in oil-rich countries in the Middle East.

While Islamic principles are at least 1,400 years old, modern Islamic finance emerged after the oil price rise in the 1970s, which transferred wealth to the Gulf energy producers and led to the founding of large Islamic banks. The global market for Islamic financial services is estimated to have risen to USD1.46 trillion in 2012, with corporate banking and sukuk products developing fast.

Sukuk in Arabic is the plural of sakk, a certificate showing ownership of the asset. The Ottoman Empire is believed to have first issued a sukuk in 1775, when it borrowed money against future income on tobacco customs levies.

Islamic law prohibits the payment of interest. Instead, those who invest in sukuk – for example, to help fund the building of an Airport – gain a share in owning the asset and so are entitled to a share in the Airport ’s revenues. Once the sukuk is issued, it can be traded on local capital markets.

The need for large investment in infrastructure – roads, railways, ports and housing – offers opportunities, notably in Asia and emerging markets in general. Since Malaysia began issuing sukuk in 2000, the bonds have grown in importance, while they are also becoming popular in Saudi Arabia and the United Arab Emirates (UAE), particularly Dubai. Recent entrants to the market include Kazakhstan, Egypt and Turkey, which could become a big market because of its need for infrastructure.

Like all financial services, Islamic finance needs an appropriate supervisory framework and legislation is often the first step towards opening a new market. Financial institutions also need to ensure they have sufficient shariah expertise and advice to develop appropriate products.

Three factors are driving the market’s growth. First, it is becoming part of normal retail and corporate banking in core Islamic countries, such as Saudi Arabia where its share of the banking market has doubled in recent years to more than 50 per cent. The current market dynamics in the Gulf are favourable.

Second, its growth appeals to other markets, particularly in the Muslim world, where borrowers are attracted by the prospect of cross-border flows from the Gulf countries.

The third driver is innovation. Two years ago, the sukuk market was limited and bonds were mostly restricted to five years or less. Now there are longer-term offers, perpetual bonds, and “hybrid capital” issues allowing a mix of debt and equity.

Since 2008 Malaysia has led global sukuk issues, followed by Saudi Arabia and the UAE. Dubai aims to become the global “capital of the Islamic economy” and also to expand in takaful (Islamic insurance).

London is targeting cross-border flows, helped by its scale as a financial centre and its legal system which is recognised internationally. Sukuk issues on the London Stock Exchange have raised more than USD49 billion.

For some, using sukuk is a matter of principle, for others it is pragmatic: they will do so if the terms are better than a conventional bond. During the global downturn in 2008, sukuk issues hit a low. But they have recovered strongly, rising from USD19.5 billion in 2008 to USD42.8 billion in 2013. Issuance since 2008 is USD196.8 billion.

Looking forward, the Islamic economy is developing quickly. From finance to entertainment, to food, fashion and family travel, the growth of an economy that adheres to faith-based values is increasing in importance. Taken together, Islamic economies currently represent more than USD8 trillion in GDP with a large young population – 1.6 billion with an average age of 24 – growing at twice the rate of the global population. As consumption drives increased trade and economic links between these countries, and the Islamic economy grows, new opportunities will require financing.

Greater availability of sukuk gives more choice to companies and investors and allows issuers to offer products tailored to specific needs. This has underpinned the growth of the market both inside and outside its core countries.

Source: http://finchannel.com/Main_News/Banks/130052_Seeking_sukuk_success/

First Gulf Bank follows numerous institutions to find funding in Malaysia’s sukuk market

Abu Dhabi’s First Gulf Bank, the third-largest bank by assets in the UAE, will raise 3.5bn ringgit ($1.07bn) with Islamic bonds in Malaysia, according to a statement yesterday by credit rating agency RAM Ratings. 
The Islamic bond, or sukuk, programme will be issued by the bank’s funding unit, FGB Sukuk Company II Ltd RAM rated the program ‘AAA’ or Stable on the bank’s size and high likelihood of government support, as the Abu Dhabi ruling family owns 64% of the firm. 
First Gulf Bank follows numerous institutions to find funding in Malaysia’s sukuk market, the world’s largest. More than two-thirds of global sukuk issuance in the first half of 2013 took place in Malaysia, followed by Saudi Arabia and the UAE. 
“The ratings also incorporate the bank’s excellent profitability, robust capitalisation, expanding franchise and moderate asset quality,” said RAM. 
Funds from the programme will go toward expanding the bank’s day-to-day business. RAM did not indicate when the first issuance will take place.


Source: http://www.gulf-times.com/eco.-bus.%20news/256/details/383705/-first-gulf-bank-to-set-up-$1.07bn-sukuk-in-malaysia

Successful launch of Nationwide Road Show to promote Islamic Banking and Takaful

The awareness campaign has started from Peshawar, and will end in Karachi while passing through 30 different cities of Pakistan and organizing 100 events 

04-03-2014

(Peshawar) National awareness campaign “Road Show 2014” has started today  from Peshawar to promote the Islamic Banking and takaful, to trim down the rising criticism and objection on Islamic finance, thriving the Islamic Financial methods in Shariah perspective in the country to get rid of interest element by benefitting Islamic Banking and Finance. The awareness campaign named as “Khyber to Karachi” Road Show 2014 which will pass through 30 different cities of Pakistan from Khyber to Karachi, will conduct 100 free seminars and workshops especially in Chambers of Commerce and Industries, Trade Associations, Universities, Professional Institutes and Industrial Estates to equally benefit the businessmen, industrialists, professional experts and students.

Stating the objectives of nationwide awareness campaign “Road Show 2014”, the Organizer, Muhammad Zubair Mughal, Chief Executive Officer – AlHuda Center of Islamic Banking and Economics (CIBE) said that the prime objective of the Road Show is to enhance the awareness of Islamic Banking and Finance among the masses and to eradicate the objections that has been put on Islamic banking and finance through different propagandas. He said that the promotion of Islamic banking and finance is necessary for the economic development and prosperity where we can benefit the agriculturists, industrialists and the whole economy with Islamic financial services by strengthening our financial institutions and also the Sukuk (Islamic Bonds) can be strengthened and poverty can be alleviated through the Islamic microfinance.

He said that the rationality behind Islamic financial system can be observed in the recent global financial crisis where thousands of interest based financial institutions were ruined but no Islamic financial institute was adversely affected by such upheaval although there are more than 1500 Islamic financial institutions working with interest free modes such as Asset Based Financing under ethical practices around the globe and number of international financial institutions are transforming towards the Islamic Banking and Finance. He said that Alhamdulillah, today, we started the awareness campaign “Road Show 2014” from Peshawar followed by seminars in University of Peshawar, Agriculture University of Peshawar and Khyber Pakhtunkhwa Chamber of Commerce and Industry etc and this road show, passing through 30 different cities, will conclude after a long way of 3 months at Karachi. After the Road Show a comprehensive report on Islamic Banking in Pakistan will be published. 

Bahrain financial sector 'grows on GCC demand'

MANAMA: Growing demand for more sophisticated financial products and services helped drive growth in Bahrain's financial sector during last year, according to the Economic Development Board (EDB) and Central Bank of Bahrain (CBB), with the trend expected to continue into 2014.

Bahrain attracted a number of businesses, with the number of registered financial services firms swelling to 415 by the end of the year, making it one of the largest financial centres in the region.

Among the businesses that established in Bahrain in 2013 were Cigna, a global health insurance and health services provider which launched its regional third party administration company employing 50 people in Bahrain, Julius Baer, the leading Swiss private banking business, and Takaud, the first specialist savings and pensions provider in the Mena region.

"The six economies of the GCC are worth a combined $1.5 trillion and with ongoing investment in infrastructure and an expanding population, demand for financial services is growing," said Transportation Minister and EDB acting chief executive Kamal Ahmed.

"Bahrain offers a highly-skilled bilingual workforce, a tried and tested regulatory framework, low operating costs and excellent connectivity across the region, with particularly strong access to the region's largest economy, Saudi Arabia.

"This makes Bahrain an ideal location for financial firms that want to establish a sizeable long-term presence in the GCC and take advantage of these trends.

"We have seen a number of these firms establishing offices in Bahrain in 2013 and we are confident that this will carry on into 2014 as demand grows and we continue to implement reforms that will enhance our role as a regional financial hub."

Alongside strong growth last year, the kingdom also developed a number of reforms to ensure that the regulatory framework continues to meet the sector's needs and encourage long-term growth.

The CBB has brought in new directives on banking remunerations and fees, updated directives on banks' internal audit function in line with new Basel requirements and issued new rules that meant that all applications that are prepared in accordance with the Unified Standards issued by the GCC by Gulf issuers will be accepted in Bahrain, easing the integration of GCC securities markets.

The CBB also recently implemented new rules set to boost the takaful sector by addressing some issues around solvency, which have had the potential to hold back the rapidly expanding industry.

The takaful industry in Bahrain has experienced a remarkable growth in the last ten years - the industry grew by almost 22 per cent in 2012 - and by continuing to evolve the takaful model, the kingdom will remain a leading jurisdiction for the sector.

CBB Governor Rasheed Al Maraj said high quality regulatory standards lie at the heart of a successful financial sector and this is why Bahrain is determined to work at adapting and maintaining our framework in line with international standards.

"The Islamic finance sector is also particularly important to Bahrain, so the CBB's leadership in the development of Islamic finance will be maintained and enhanced through developing new initiatives and maintain an ongoing dialogue within the industry."

Education and human capital initiatives were also a major focus last year, and the CBB worked closely with a range of organisations including the Bahrain-based Waqf Fund and the Bahrain Institute of Banking and Finance (BIBF).

The Waqf Fund put in place its plan for a leadership training initiative being launched this year, to help develop the next generation of leaders in the Islamic Finance sector, whilst BIBF's Centre for Islamic Finance continued to expand its international footprint, and in July last year arranged a training event for 29 participants from 16 different countries.

Two independent reports from KPMG and Thomson Reuters also highlighted the core strengths of the financial services sector.

In December 2013, KPMG published a research report looking at the typical costs associated with operating a financial services firm in Bahrain, Dubai, and Qatar.

This included cost of operations, cost of set-up, and living costs, and the report concluded that overall, the total cost of doing business in Bahrain is almost half that of Dubai and Qatar. The ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI), a numerical measure launched in December last year and representing the overall health and growth of the Islamic finance industry worldwide, highlighted Bahrain's developed Islamic finance sector, ranking first in the Mena region, with total assets worth $47 billion. Bahrain also had one of the most developed Islamic finance knowledge landscape, and performed well in terms of governance, with a comprehensive regulatory framework covering all aspects of the Islamic finance industry. All GCC countries made it into the top 15 worldwide, with Bahrain ranking first amongst them, demonstrating the overall strength of the Islamic finance sector in the region.

Source: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=371666

Islamic banking opens a new window of opportunities

Dubai: Omani banks have started offering Islamic banking services following the introduction of the Islamic Banking Regulatory Framework (IBRF) in December 2012.

“We anticipate that Islamic banking operations in Oman could capture a 6 per cent to 8 per cent share of system assets within the next three to five years and this share will likely stem primarily from the ‘conversion’ of customers from conventional to Islamic banking services. As a result, we expect that Islamic operations will capture a disproportionate share of the anticipated total system annual growth of 8 per cent to 10 per cent over the next three to five years,” Elena Panayiotou, Assistant Vice President — Analyst at Moody’s, said.

Banks are expected to incur sizeable costs to establish brand-new Islamic banking franchises and build operational risk management infrastructures that ensure Sharia compliance.

Oman’s central bank expect the Islamic banking units will enhance the overall banking services in the country. “The creation of Sharia compliant units will enhance competition among them and thus improve the banking services for customers and lowering its cost, as well as raising the level of financial inclusion and the growth of Islamic banking in general along with the traditional banking,” Hamoud Bin Sanjour Al Zedjali, Executive President of the Central Bank of Oman (CBO), said in a statement to Oman News Agency (ONA).

Although competition will likely intensify as new Islamic banks come into the market, bankers and analyst do not expect major changes in the Omani banking landscape in the next three to five years. This is because the new Islamic windows of the existing conventional banks, and particularly that of Bank Muscat will be well positioned to capture a large market share in Islamic banking given their ability to leverage existing customer bases and infrastructure.

SPPP aimed to overcome public sector inefficiencies: Ishaq Dar

ISLAMABAD, Mar 2 (APP): The Finance Minister Senator Mohammad Ishaq Dar said the government sees Strategic Public-Private Partnership (SPPP) aimed at utilizing private sector management expertise to overcome public sector inefficiencies. He said this while chairing a meeting here at the Ministry on Sunday to review the reform and restructuring plan of PIA including strategic partnership, says a press release issued here. 

The Minister said over the year, mismanagement and structural inefficiencies in the state-owned enterprises (SOEs) have marred public sector governance. 

He said that continuous injection of resources into the SOEs is  fiscally not sustainable on an indefinite basis and the most viable option available is to restructure them through strategic partnership with the privatesector through 26% offloading of shares.

The Minister said that we aim to enhance welfare of the employees of  the SOEs by making these organizations profitable and interest of the employees will be protected. 

He said by injection of 26% private sector strategic partners will in  no way hamper the overall status of the SOEs other than to improve their performance and to ensure capacity building of their employees.

Shujaat Azeem, PM’s Advisor on Aviation briefed on the reforms being introduced in PIA. He also informed about the progress of leasing of more efficient airplanes to enhance the performance of the national carrier.

The meeting was also attended by Muhammad Zubair, Chairman Privatization Commission, Rana Asad Amin, Advisor to Finance Ministry and senior officials of the Ministry of Finance.

Source:http://www.app.com.pk/en_/index.php?option=com_content&task=view&id=269074&Itemid=1

Islamic banking represents 12 percent of industry: Deputy Governor SBP

Islamic banking industry in Pakistan has been growing at a fast pace ever since its re-launch in 2002 and now represents over 12 percent of overall banking industry with 19 Islamic banking institutions offering Islamic banking products and services through a network of over 1300 branches across the country. 

Speakers at two-day workshop, organised by State Bank pf Pakistan (SBP), for journalists on Islamic Banking said that recently SBP has announced five-year strategic plan for Islamic Banking Industry (IBI) aimed to provide a roadmap to the industry for the next level of development. Saeed Ahmed, Deputy Governor SBP, inaugurated the workshop on Monday and said that various conventional banks are interested to convert their operations into Sharia-based banking upon which the central bank is reviewing their requests whereas the central bank has imposed bar on Islamic banks to convert into conventional bank. 

"SBP prefers Islamic banking and to promote it has been allowing new Islamic banks, conversion from conventional to Islamic banking, opening up subsidiary or Islamic Banking Division", he said. He said that SBP has stopped issuance of license for setting up conventional banks in Pakistan. "We think the present number of conventional banks are enough to cater the needs of Pakistan's economy and there is need to setup/promote Islamic banking instead of conventional", he added. 

However, he said that, SBP has decided to strictly monitor the performance of the Islamic Banking industry aimed to ensure that they are operating as per Islamic Sharia. The Islamic Banks are more accountable to SBP and Sharia advisor than conventional banks, deputy governor added. He said that SBP is working on its major role to ensure the participation of every citizen in the financial system, through its Financial Inclusion Policy, and the system of Islamic Banking will prove to be a bridge to the way of success in the present scenario. 

Addressing the workshop, speakers said that government is making all efforts to develop an alternate system for all segments of the banking industry. They said that a plan of Islamic products for National Saving Scheme (NSS) is also under consideration and likely to be launch soon. Presently, Islamic banks are leaders in several sectors and three leading Islamic banks have some 85 percent portfolio of housing finance. 

Talking about the money market operations they said that there are two different models of interbank money market for Islamic banks which are under consideration and an improved money market system is likely to be launched in next few months, they revealed. Saleem Ullah head of Islamic Banking department SBP, Mufti Irshad Ahmed Ijaz, Shariah Advisor, Mufti Muhammad Najeeb Khan Sharia Advisor Summit Bank Limited, Mufti Khalil Ahmed Aazami, Hasan Aziz Bilgrami Chief Executive Officer BankIslami, M. Farhan- ul- Haq Usmani, Vice president Shariah Audit and Financial Advisory Meezan Bank, Muhammad Faisal head of products and business development BankIslami, Umar Siddique, spokesman (acting) SBP and Nighat Tanveer also speak on the occasion. 

Source: http://www.brecorder.com/money-a-banking/198/1157187/

Islamic Banking and Finance Society launched at Oxford University

The inauguration of the Islamic Banking and Finance Society (IBFS) at the Oxford Union Debating Chamber this month saw leading industry figures speak about the sector and represented another step in the growth of Islamic finance.

The event – titled Islamic Banking: Ethical Capitalism? – looked at the Islamic finance and banking sector and where its future lay. One keynote speaker, Baroness Warsi, senior minister of state and minister for faith and communities, described London as one of the key areas for Islamic finance and one in which the sector could grow.

She noted how far the industry had come in the last two years and pointed out Islamic finance is growing 50% faster than traditional banking in Britain. By the end of 2014, an industry expert previously predicted that the sector will be worth $2 trillion (£1.2 trillion) globally, with London and Dubai competing to become the global hub.

It’s not just Muslims that are driving the growth. The Islamic Bank of Britain, which recently launched theUK’s first Islamic ISA, estimates that around 87% of new applications for fixed term deposit accounts are from non-Muslim customers. Instead, ethical savers and investors are using Islamic banking as a way to ensure their values are reflected in their money decisions.

Islamic and ethical finance are similar in many ways. Sharia principles mean Muslims cannot invest in certain industries, many of which are so-called ‘sin stocks’ such as tobacco, gambling or alcohol. The payment of interest is also banned.

Speaking to Gulf Times after the inauguration, chairman of Islamic Finance Salah Jaidah said, “The base of Islamic finance is definitely the ethical part and most of the conducts with Islamic banking prevent the over-leverage that we have seen in the conventional banking side. Every transaction has to have an underlying asset, so there is value creation for the person who is taking the finance or the person who is extending the assets.”

He added that if these principles and the spirit of profit sharing were ingrained in more financial institutions this would give everybody the responsibility of making sure that due diligence, asset value and potential investments are recognised. As a result it could benefit the whole sector, as everybody would have to take on a portion of the loss if areas failed.

Source: http://blueandgreentomorrow.com/2014/02/21/islamic-banking-and-finance-society-launched-at-oxford-university/

AlHuda CIBE will Organize African Islamic Banking and Finance Road Show

Int’l conferences will be organized in Tanzania, Tunisia, Nigeria, Kenya, Ghana, South Africa and Mauritius during the Road show

 (Lahore): AlHuda Centre of Islamic Banking and Economics (CIBE) is committed to hold an International Road Show on Islamic Banking and Finance that will be started from April 2014 form Tanzania and will successfully be ended by September 2014 in Mauritius by organizing Int’l conferences on Islamic Banking and Finance in seven (07) African countries during this entire road show so that African region could progress by taking benefit from the practices of international Islamic banking. Besides Islamic banking and finance, Takaful, Sukuk, Islamic Funds, Islamic Microfinance and various other relevant topics would be discussed during the programs.

Addressing to the announcing ceremony of the Road Show, Muhammad Zubair Mughal, Chief Executive Officer, AlHuda CIBE said that Islamic banking and finance is rapidly increasing all over the world and its assets would reach to 2 trillion dollars by the end of 2014. But unfortunately, the development of Islamic banking and finance is very slow in the entire African region while the 54 African countries could rapidly progress by implementing Islamic finance and Sukuk. The dilemma of African countries is mainly poverty and it could also be overcome through the implementation of Islamic mode of banking and finance in the region where almost 50% population is Muslim while Muslims and non-Muslims both can take benefit of Islamic banking and finance.

While giving reference of Islamic banking and finance in Africa, he further added that there are various countries of Africa where serious efforts are observed for the development and promotion of Islamic banking and finance i.e. Sudan, Tunisia, Egypt, Morocco South Africa and Nigeria while there are a few countries that are taking rapid initiatives towards Islamic banking like Kenya, Mauritius, Libya, Ghana and Senegal. Current economic conditions have further highlighted the need of Islamic banking and finance and African region would definitely take advantages of it. 

He further said that besides the promotion of Islamic banking and finance, the purpose of the road show is also to acknowledge the need of giving hype to the system beyond any political and religious refrains. Specialized training workshops on various relevant topics will also be part of the international conferences like Takaful workshop in Tanzania, Sukuk workshop in Tunisia, Islamic Microfinance in Nigeria, Sukuk in South Africa, Takaful workshop in Mauritius. The core objective of the entire program is to strengthen the foundations of Islamic banking and finance in African region to give back to the progress of Islamic mode of banking and finance there. 

It is to be noted that AlHuda Centre of Islamic Banking and Economics is an international organization working for the promotion of Islamic banking and finance that is working for education, trainings, advisory and consultancy. For further details: www.alhudacibe.com.

Islamic banking gaining momentum across the world: SBP deputy chairman

Islamabad: Deputy Governor of the State Bank of Pakistan Saeed Ahmad has said that Islamic banking is getting momentum not only in Pakistan but across the world.
He was addressing the inaugural session of two-day International Conference on Islamic Business (ICIB 2014) in which speakers discussed various aspects of Islamic business and finance.
Organised by Riphah Center of Islamic Business, a constituent institute of Riphah International University in collaboration with International Islamic University Islamabad (IIUI) & the State Bank of Pakistan (SBP) is being attended by world renowned Islamic scholars and economists from across the globe.
The theme of the conference is “Equity, Venture Capital, Corporate Governance and Institutional Development for Equity Investments: Prospects and Practices from Islamic Perspective”.
The Deputy Governor of State Bank of Pakistan Saeed Ahmad was the chief guest at the inaugural session of the conference while Prof Datuk Syed Othman Al Habshi from Malaysia and Prof. Khurshid Ahmad, Chairman, Institute of Policy Studies Islamabad were the Keynote speakers on the occasion.
Deputy Governor of the State Bank of Pakistan Saeed Ahmad also said that the State Bank as a regulator in banking is playing an important role in projecting Islamic banking and finance in the country. The government has established a committee for the purpose and prominent bankers and Islamic scholars are its members. The Deputy Governor himself is head of this committee. The committee is working with full swing to prepare guidelines for Islamic banking and finance as per teachings of Quran and Sunnah.
He lauded the efforts of Riphah International University for organising series of such conferences giving an opportunity to researchers and scholars to discuss the Islamic banking and finance in depth.
This is the 3rd International Conference on Islamic Business organised by Riphah International University. Earlier two conferences were held in February 2011 and February 2012.
The President of Islamic International University Islamabad Dr Ahmad Yousif A Al-Draiweesh, in his address in Arabic, expressed the confidence that the conference will be much helpful in projecting Islamic business and finance.
It will provide a platform for dialogue and discussions between researches, policymakers, corporate leaders, business managers, practitioners of Islamic banking and finance.
Prof Khurshid Ahmad, in his key-note address, spoke on the risk and equity based investments and financing and explained how the Islamic business and finance could help to resolve the global economic problems.
He said the economic crises in 2008-09 could not be handled by the western system of finance and the people have to suffer because of this debacle. He said the institutions practicing finance under shariah not only provided the solutions of the problems faced by the world economy but also provided a clear path to meet such challenges in future.
Prof Datuk Syed Othman Al-Habshi, in his speech, said Islamic banking so far is moving in right direction and has crossed a number of milestones over the period of last four decades. He hoped this conference will help in formulating the strategies to meet the challenges being faced by Islamic finance.
Earlier, the Pro-Chancellor of Riphah International University Hassan Muhammad Khan, in his remarks, said by organizing such conferences of international level Riphah University intends to provide a platform for discussing the vital issue of development of the Islamic business, banking and finance so as to create awareness about shariah complaint businesses. The Vice Chancellor of Riphah International University Prof. Dr. Anis Ahmed, in his welcomed address, said this event is designed not just for creating awareness about shariah conforming business principles but its major objective is to enhance talent and understanding of the practitioners and researchers on problems faced by the financial managers and the investors.
The conference held four working sessions on the opening day today on various subjects relating to the Islamic business and finance. These included equity, investments, trust and institution building for promoting Islamic finance and corporate governance of Islamic institutions. There will be four working sessions on Tuesday (today) besides the concluding session at 5pm at Quaid-e-Azam Auditorium Faisal Mosque campus in Islamabad. 

Source: http://www.dailytimes.com.pk/business/11-Feb-2014/islamic-banking-gaining-momentum-across-the-world-sbp-deputy-chairman

Oman: Islamic Banking On The Rise

The Omani banking sector is a small but prudent and well performing sector. Profitability among Oman’s banks has been healthy due to good margins, increasing non-interest income and good loan asset quality. In 2012, Omani banks recorded profit growth of around 20 per cent but 2013 growth may not match this. While government and state enterprises support sector funding by accounting for 35 per cent deposits, unlike other GCC markets their borrowings are quite small.

The private sector accounts for around 87 per cent of total credit and has represented the principal area of growth for banks over the past few years. However, more recently loan growth has slowed due to the implementation of macro prudential regulations by the Central Bank of Oman (CBO). The Omani banking sector’s loan asset quality is currently good, with NPLs at around two per cent of gross loans.

The banking sector in Oman is heavily concentrated with the top three banks (Bank Muscat, National Bank of Oman and Bank Dhofar) accounting for approximately two-thirds of total credit. Bank Muscat holds a commanding position in the sector.

Despite this, there are a number of small banks, and in early 2013, the Capital Market Authority publicly encouraged consolidation in the country’s financial sector and suggested limiting issuances of new bank licenses in the country. There has been some activity, with HSBC acquiring Oman International Bank’s operations to form HSBC Oman. Domestic Omani banks continue to grow and to support this have raised over $1 billion in capital and subordinated debt over the past year.

Islamic banking in Oman has become increasingly important since 2011 when the CBO announced its decision to license Islamic banking services with the objective of diversifying and widening banking services. A Royal Decree amending the banking law and the legal authorisation for Islamic banking was issued in December 2012. Detailed instructions by way of the Islamic banking regulatory framework have also been introduced.

Two new local banks – Bank Nizwa and Al Izz Islamic Bank – were granted approval to operate as Islamic banks. Bank Nizwa commenced operations in December 2012 and more recently Al Izz started business. The new bank’s deposit products include a current account based on the concept of ‘Qard-Hassan’, allowing customers instant access to their money in multiple currencies, using their international debit card. It is the first fully-fledged Islamic bank in Oman to offer Sharia-compliant titanium and platinum credit cards. A number of conventional banks have established windows for Islamic banking.

Good GDP growth in Oman and favourable monetary and fiscal policies has had a positive impact on the growth and performance of the commercial banks in Oman. The balance sheets of commercial banks have strengthened, further supported by the robust growth in deposits and credit. While credit to the government declined in 2012, credit to public enterprises and the private sector increased robustly. Lending to the private sector was fairly balanced between corporate and retail sectors. The latter comprises mainly of personal loans including residential housing, which account for around 46 per cent of the total retail book.

The short to medium-term outlook for the Omani economy is positive based on current expectations of relatively favourable world energy prices and ongoing and planned investment to boost oil and gas capacity. This favourable operating environment will thus continue to support Omani banks’ lending growth and profitability over the short to medium-term.

The CBO has over the past few years initiated a number of regulatory and supervisory measures to improve efficiency of the country’s financial system in general and the banking system in particular. The CBO also reduced the interest rate ceiling on all new personal loans from eight per cent to seven per cent and introduced new micro prudential norms for personal loans.

The debt service ratio for salary linked loans was capped at 50 per cent of net salary on non-housing personal loans and 60 per cent on housing loans. The tenor is not to exceed ten years for the former and 25 years for the latter (excluding maximum of two monthly waivers in a year).

Bank Muscat’s net profit for the nine months to the end of September 2013 was RO102.5 million against RO104.2 million in the same period of 2012. In part, the marginally lower performance was linked to provisions made earlier in the year against prepaid travel card fraud. Net interest income from conventional banking stood at RO163.8 million at the end of September against RO168.3 million in the corresponding period. Non-interest income was, however, higher.

National Bank of Oman (NBO), owned 35 per cent by Commercial Bank of Qatar, also reported slightly weaker operating profit in the first half of 2013 with revenues flat. Impairment charges also rose. However, the bank has good coverage and liquidity. NBO’s Islamic banking operations have also provided another source of revenue although contributions are modest at the moment.

The sultanate’s economy is expected to have grown by around six per cent in 2013 but could fall to below four per cent in 2014 due to a weaker oil price. The increased expenditure in 2013 is anticipated to give a boost to commercial and economic activity. Allocation for the development programmes of ministries and government units is to be enhanced by about 30 per cent to complete ongoing infrastructure projects, such as ports, airports, roads, water, sanitary drainage, and infrastructure projects for the Duqm special economic zone and other economic zones.

While the growth of the expenditure side of the budget is high and unprecedented, this is anticipated to be financed from real resources without the need to borrow or withdraw from funds in an unplanned manner if oil prices go down severely.

Going forward, with the reasonable economic growth conditions in Oman, the Omani banking sector should be able to expand both deposits and assets with returns remaining sound if not spectacular.

Source: http://gulfbusiness.com/2014/02/oman-islamic-banking-rise/#.UwnEj_mSwsc